The government should focus on the pensions dashboard rather than making the idea of a "pot for life" reality.
Appearing on this week’s FTAdviser podcast, Tom Selby, head of retirement policy at AJ Bell, said the Department for Work and Pensions should look to focus on building one pension policy at a time to get it right.
He said: “To say we're going to build pensions dashboards and we're also going to commission this whole new consolidator to be built at the same time and then manage those two projects simultaneously, in an ideal world that could be made to work.
“But history tells us that, generally, governments can struggle when it comes to building big things. There's a lot of moving parts there and actually focusing on one thing at a time where you can, to me would seem much more sensible.”
Earlier this year the DWP said it will work to encourage consolidation to solve the problem of small pension pots. But pensions minister Laura Trott said the longer-term solution to this issue would be to move to an Australian-style "pot for life" system.
But this week’s podcast guests argued that by sorting the pension dashboard first, it could help to mitigate the small pots issue.
Selby suggested creating pensions dashboards in the way that they have been envisioned, which would show everyone's retirement pots in one place online, would solve the problem sooner than a "pot for life".
He said: “Does it mean that everybody has the option to see where all their pots are and then can make a choice about consolidating them at retirement?
“Then the question is whether or not the solution is that everybody automatically has all their pots consolidated in one place for them through inertia or whether you just give people the tools to know what their pensions are worth and then to be able to make ideally as simple a decision as possible to consolidate them.”
Also appearing on the podcast, Kate Smith, head of pensions at Aegon, said lots of other policy changes were dependent on the dashboard which meant it should be considered a priority.
She said: “We need to make it as simple as possible, not only to access it, but to understand the data. And later on if we've got all the protections in place, to allow people to consolidate their pensions much much easier if that's the right thing for them.”
amy.austin@ft.com